FPL WEIGHS CONSERVATION PROS AND CONS

It seems simple enough to understand: Investments in energy efficiency cost less than smog-producing, ozone-depleting, budget-busting power plants.

But the truth is that saving electricity also could raise electric rates more than a new power plant.

Thus begins the great debate over conservation: Should the utilities and policymakers focus on rates, which go up as more energy is saved and the utility sells less, or on customer bills, which go down when less electricity is used.

In one corner, the power company:

"Anything that raises rates is not positive," says Florida Power & Light President Stephen Frank. FPL has taken the toughest stand among Florida utilities on the issue, insisting that it will depend on a cost-effectiveness test for conservation programs that includes the utility's cost for lost revenues from energy savings.

In the other corner, conservation activists: "It's (utility) bills that customers pay, not rates," says Terry Black, consultant to two groups that are pushing the conservation agenda in Florida, the Legal Environmental Assistance Foundation and the Project for an Energy Efficient Florida.

The conservation groups say that the test FPL uses is too strict and rejects most true energy-savings programs in favor of measures that only shift electric use away from times of peak demand.

The Florida Public Service Commission approved a set of conservation goals last week but left open the question of how utilities should determine cost- effectiveness.

Utilities must present plans to the commission for approval. If the commission doesn't think the programs suggested by the utilities save enough electricity, it can require more.

"There's a lot of untapped energy efficiency that would cost less than new supply," Black says.

For example, a study by the Florida Solar Energy Center, commissioned in part by FPL, showed that a package of efficiency measures could reduce electric use in homes with pools by almost 50 percent and homes without pools by about 40 percent.

The measures include adding radiant barrier insulation and reflective window film, putting in high-efficiency air conditioners, refrigerators and pool pumps, using timers on air conditioners and pool pumps, sealing air conditioning ducts, using compact fluorescent and halogen lights, and installing solar water heaters.

FPL does not offer programs to make every home in South Florida as energy efficient as possible, but it does have several programs that can help homeowners be more energy efficient.

Most of the company's programs focus on reducing electric use at times when everybody wants to use electricity -- such as in the afternoon of the hottest days of the year.

"When we look at ourselves versus other utilities, we have reduced energy consumption much more than most," said Michael Yackira, FPL senior vice president for market and regulatory services.

A study by the Florida Energy Office found that FPL has saved 17 billion kilowatt hours of electricity since 1978, allowing it to defer the equivalent of two 500-megawatt power plants. The company has spent about $400 million on the programs that allowed it to avoid building those plants.

The company has plans to spend at least $100 million more over the next decade, with greater savings of electricity. But Nelson Hawk, FPL's director of energy efficiency programs, said the company expects to avoid building five or six more "fairly good size" power plants.

Conservation activists say that's not enough -- that the company should focus on programs that cut the amount of electricity people use day to day.

But with a reduction in demand, comes a reduction in sales and, ultimately, a reduction in profits -- unless the utility raises rates.

"Someone has to pay for those programs," Yackira said. "I don't know how you can increase the programs past a certain level without also increasing rates."

Black agrees that, with successful energy efficiency programs, rates go up. But, he says, FPL and the Public Service Commission should be willing to increase rates slightly in exchange for large decreases in customer bills.

The problem FPL has with such thinking is that not everyone will get the decreases in bills, because not everyone can take advantage of the conservation programs.

Some people already have energy efficient homes and businesses. Others cannot afford even small initial investments in new air conditioners, refrigerators or water heaters.

The company -- like many other utilities across the country -- is concerned about offering programs that would raise rates for everyone but only benefit some customers.

"The question is how best to accomplish the savings," says Lewis Perl, senior vice president of National Economic Research Associates, a utility consulting firm. "Don't take my money and give it to another customer because the utility knows what's best."

WHO PAYS FOR CONSERVATION?

In a typical cost analysis, conservation programs could cost less than building a new power plant but still raise customer rates. Here's how:

-- CASE: The Doe family uses 10,000 kilowatt hours of electricity a year at cost of 10 cents per kilowatt or $1,000. The family is growing and is going to need 2,000 more kilowatt hours next year. The utility must find a way to provide that power.

THE CHOICE

1. Build new plant: Power company decides to meet the need by generating and selling more power.

--Cost to Does: Bill goes up to $1,100 per year, 11 cents per kilowatt hour for 10,000 kilowatt hours. But without the program, the family would have used more electricity -- 12,000 kilowatt hours -- and paid at least $1,200.

NOTE: Because the power company sells more electricity by generating more, it can spread the cost of a power plant among more customers. The conservation programs, on the other hand, are a disadvantage to customers who cannot take advantage of the energy savings.